Identify the trade patterns between Australia and Indonesia in presence of the export subsidy.

Please read the following article by Peter Martin: “The Election Campaign’s Other Big Lie: the Coalition Hasn’t Delivered ‘Export Agreements”. The paper can be found following the assignment’s questions. The article criticizes the Coalition government for claiming during the recent election campaign that the free trade agreements with Japan, Korea and China the Coalition government signed had created exports. Question 1. In the article Peter Martin, the author, criticized the Coalition government by making the following important statement: “In every case for which we have clear evidence, our trade agreements seem to have boosted imports more than exports” From the UN Comtrade Database please use real data of Australia’s bilateral trade with the following three countries: New Zealand, Thailand, and the US to evaluate if the critique made by Peter Martin above is justified by the data. Question 2. Assume that the world consists of only two countries: Australia and Indonesia. Australia’s demand curve for A4 copy paper and Australia’s supply of A4 copy paper are Q = 100-20P (Demand) Q = -20+20P (Supply) Indonesia’s demand curve for A4 copy paper and Indonesia’s supply of A4 copy paper are: Q = 80-20P (Demand) Q = 40+20P (Supply) where Q and P denote quantity and the price in Australian dollars, respectively. Assume now that Indonesia is currently provides a specific export subsidy of AU$ 0.5 to its domestic producers of A4 copy paper. Please Identify the trade patterns between Australia and Indonesia in presence of the export subsidy. Specifically, which country will be the exporter of A4 copy paper? What is the price of A4 copy paper in Indonesia and in Australia? What is the volume of their bilateral trade? What is the export subsidy payment? How much does the export subsidy help Indonesian producers to increase their exports of A4 copy paper to Australia? Please be elaborate in your answers. Assume that world consists of two countries: A and B. Country A’s demand curve for wheat and Country A’s supply of wheat are: QD =200 − 40P QS = 40 + 40P Country B’s demand curve for wheat and country B’s supply of wheat are: QD = 160 – 40 P QS = 80 + 40 P Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade? Country A imposes a specific tariff of 0.5 on wheat imports. Determine and graph the effects of the tariff on the following: (1) the price of wheat in each country; (2) the quantity of wheat supplied and demanded in each country; (3) the volume of trade. Determine the effect of the tariff on the welfare of each of the following groups: (i) Country A’s import-competing producers; (ii) Country A’s consumers; (iii) country A’s government.

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